Airbnb rentals are one of the modern real estate investment strategies. It is a short-term rental strategy that is similar to a hotel. However, what makes Airbnb special? And how does Airbnb work? Learn here.
Without further introduction, let us dig into the most basic aspects of Airbnb rentals as a real estate investment strategy:
Related: Vacation Rental Websites: Comparing Airbnb, VRBO & Booking.com
How does Airbnb work: What is Airbnb?
Airbnb is a platform that allows real estate property owners to list their property for rent. It is considered a short-term rental strategy since the renting periods start from a couple of days up to a month. The concept of an Airbnb rental is similar to a hotel except that Airbnb is cheaper and provides a unique adventure for both the landlord and the tenant.
How does Airbnb work: Airbnb set up
On Airbnb, landlords are referred to as hosts, while the tenants are just guests. What you need to do is create an account on Airbnb. After that, you should begin listing your rental property by providing all the details about it. You do not have to pay anything for listing; it is totally free.
How does Airbnb work: How to price Airbnb?
The good news is that Airbnb gives you the opportunity to change your pricing. So, you can take advantage of that flexibility and price your rental property based on a few factors. You should take into consideration the location, the season, the competition, and other factors. When pricing your Airbnb rental property, make sure to check other Airbnb properties within the same location to have a sense of the price range.
Related: How Do I Price My Airbnb Property
How does Airbnb work: What fees apply to Airbnb rentals?
Airbnb charges hosts 3% in return for service that is deducted from the booking subtotal. Basically, this is the only fee that applies to hosts.
On the other hand, there are more fees guests can expect on their reservations. These include Airbnb cleaning fees which are optional and 6-12% service fees that Airbnb charges guests on each reservation.
How does Airbnb work: Where is Airbnb legal and where is it illegal?
When dealing with Airbnb rentals, you can expect to have some legal issues. Moreover, you can expect to find places where it is completely illegal, while other cities issue strict regulations regarding Airbnb rentals. However, if you are looking for the top cities for Airbnb rentals, then the answer is most major cities. Paris, Barcelona, and Japan are amongst the list. On the other hand, Santa Monica is one of the cities that have put up the strictest regulations on Airbnb rentals. This caused 80% of the listings to shut down.
How does Airbnb work: What are the success factors for Airbnb rentals?
In order for you to succeed as an Airbnb host, you should take into consideration some aspects. First of all, as the rule in real estate investing goes, “location is everything“. Your Airbnb rental property’s location can determine whether you get reservations or not. Do not worry, it does not mean that you have to have an investment property in the center of a major city to succeed. You can list a property in a rural area as well. Just make sure there are amenities available or maybe even landscapes.
Another success factor is marketing. The way you sell the property is reflected in the reservations you get. So, if your rental property is not doing well on Airbnb, you might want to check your marketing strategy.
How does Airbnb work: Airbnb investment calculator
An Airbnb investment calculator is a great tool to use towards success in the real estate investing business. This real estate tool simply estimates the cash on cash return, cap rate, Airbnb vacancy rates, and cash flow. You can learn more about Airbnb investment calculator by reading our blog ” Guide on Using an Airbnb Profit Calculator“.
How does Airbnb work: What are Airbnb challenges?
Airbnb’s biggest challenge is the legal aspect. Many Airbnb guests have faced legal issues during their stay. Moreover, some Airbnb hosts have proceeded to evacuate their Airbnb guests in order to let in other vacationers for a higher price. Along with that comes damages. Some hosts have experienced damages in their Airbnb rental properties by their guests. However, Airbnb offers a host insurance policy up to $1,000,000 for property damages, which is a good compensation for hosts.
Now, if you look at it from a guest’s point of view, there is one thing to be concerned about. That is the case in which the property does not match the description on the website.
Related: What Are the Challenges of Owning an Airbnb Investment Property
How does Airbnb work: Taxes
As an Airbnb investor, the taxes you pay are the income taxes. They are known as occupancy taxes, lodging taxes, and room taxes. This, however, means you do not pay taxes as a regular real estate investor. The taxes are usually collected from tenants upon arrival. Therefore, all you have to do is pay them in due time.
How does Airbnb work: Insurance
So, here comes the great news. Airbnb provides its hosts with an insurance of up to $1,000,000 for their Airbnb rental properties. However, these only cover any damages caused by the guests. For example, a host got a reservation for his property. He thought he was renting it to a family. When the rent ended, he found out that they were party-goers and have caused severe damages to his property. Not only that, but some items were stolen as well. So, in this case, Airbnb provides an insurance that compensates for any damages caused by the guests. Therefore, you will not have to worry about your property as long as you are taking care of it.
To sum it up, Airbnb is one of the best investment strategies in real estate. If done the right way, it could be the ultimate way to make money in real estate investing. Keeping in mind the Airbnb success factors, you will have the best-investing experience along with some extra money. For that, all you have to do is sign in to Mashvisor and begin your journey of real estate investing.